Determinants of Pension Governance: A Survey of Pension Plans in Kenya

Amos Gitau Njuguna

doi:10.5539/ijbm.v6n11p101

Abstract

Pension governance is acknowledged as a vital characteristic of a proficient private pension system as itdetermines the investment performance, operational efficiency and the security of pension benefits. Empiricalliterature shows that despite the legal and industry inventiveness, pension governance lapses continue acrosscountries. This paper investigates the determinants of pension plan governance in Kenya and recommendsmeasures that can strengthen it. The sample consists of 362 pension plans in Kenya. Statistical tests areconducted by use of Pearson correlations, regressions, Scheffé tests and Analyses of variance (ANOVA) todetermine the effect that pension regulations, pension plan design, membership age, number of members in thepension plan and plan leadership, have on pension governance. Empirical results show that pension governanceis influenced by pension regulations, leadership, and membership age. The pension plan design and number ofmembers do not have significant influence on how the pension plans are governed.

Highlights

Pension governance is acknowledged as a vital characteristic of a proficient private pension system as it determines the investment performance, operational efficiency and the security of pension benefits
While the studies address the prevalence of pension governance lapses, the present study addresses the determinants of pension governance with a view of improving such governance in Kenya. 2.1 Pension Governance Structures A pension plan’s governance structure defines and separates operational and oversight responsibilities of the stakeholders (OECD, 2009)
The pension plan design instrument measured what type of design a pension plan has adopted, namely (1) defined contribution (DC) and (2) defined benefit (DB)

Summary

Introduction

Pension governance is acknowledged as a vital characteristic of a proficient private pension system as it determines the investment performance, operational efficiency and the security of pension benefits. Proper governance of funded pension systems leads to continuous improvement by ensuring that pension plans regularly review their governance structures for operational risks, internal controls and compliance with appropriate legislations (Ambachtsheer, 2001; Clapman et al, 2007; Besley and Prat, 2005; Impavido, 2005; Clark and Urwin, 2008; Asher and Nandy, 2006; Galer, 2009). It ensures that the pension plan has the structures and processes in place to meet the required standard of fiduciary care and proper documentation of the due diligence (Moriarty and Zadorozny, 2008), improves performance of the pension plan, creates trust amongst the stakeholders and is vital to the efficient functioning of the private pension systems (Stewart, 2009) in addition to improving administrative efficiency (OECD, 2009).

Methods

Results

Conclusion